| “My query is recently we have received a letter from income tax deprtment to get PAN card and also they are asking us to the transactions where as we do not have any transaction record for day to day expenses. I have one vehicle plus driver for chilrens transportation.” I guesss you need to get some help from an Indian tax practitioner.
“So what should I reply to the income tax authorities.”---> I assume that you are either US citizen(or resinet) or a US resident under either US INS Rules or US Tax Law, then you are subject to US taxes, federal and state taxes( currently as far as I know, 9 states do NOT impose income taxes to their residents in US). So, you need to report your rental income in India on your federal and state tax returns; you need to file Sch E and report your NET rental income( on Sch E line 26) on1040 line 17.If you use a dwelling as a home and rent it for fewer than 15 days during the tax year, do not report any of the rental income on your tax return and do not deduct any expenses as rental expenses that you paid in india on your US tax return. In this case, however, you may still be able to deduct mortgage interest, property tax, and casualty losses (if you have) paid in India as itemized tax deductions on Form 1040, Schedule A.As you pay tax(es) to the Indian taxing authority in India on your rental income, you can claim foreign tax credit on your federal and state returns by filing Form 1116 and report your FTC on 1040 line 47 or report it on 1040 Sch A line 8 . I guess. You may have to make estimated federal/state income tax payments during the year since you expect to receive income , I mean rental income, not subject to tax withholding. In general, estimated tax payments are required when your withholding tax is not sufficient to cover your tax liability. Payments are made based on your estimated tax liability for the year, less your withholding taxes If you have. There are four periods for reporting and paying estimated tax. When you file your income tax return at the end of the year, these estimated tax payments, plus any income tax withheld( if you have), are credited against your tax liability based on your actual income for the year, to determine whether you are due a refund or owe additional tax. You also need to pay your quarterly self employment taxes; Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. The 2010 Tax Relief Act reduced the self-employment tax by 2% for self-employment income earned in calendar year 2011. The self-employment tax rate for self-employment income earned in calendar year 2011 is 13.3% (10.4% for Social Security and 2.9% for Medicare). For self-employment income earned in 2010, the self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).
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